Marketing Concepts and Principles: Features, Functions, and Management

**CONCEPT OF MARKETING** - Marketing is a process whereby people exchange goods and services for money or for something of value to them. - *Marketing is a social process by which individual groups obtain what they need and want through creating offerings and freely exchange produc...

**CONCEPT OF MARKETING** - Marketing is a process whereby people exchange goods and services for money or for something of value to them. - *Marketing is a social process by which individual groups obtain what they need and want through creating offerings and freely exchange products and services of value with others.* - *Marketing is concerned with exchange of goods and services from producers to consumers or users in such a way that maximises the satisfaction of customer needs.* ***MARKETING IS NOT MERELY A POST-PRODUCTION ACTIVITY.*** *It includes many activities that are performed even before goods are actually produced, and continue even after the goods have been sold. For example, activities such as identification of customer needs, collection of information* *for developing the product, designing suitable product package and giving it a brand name are performed before commencement of the actual production.* **FEATURES ON** **1. Needs and wants:** Marketing involves satisfying customer needs and wants better than the competitors. A marketer's job in an organisation is to identify needs and wants of the target customers and develop products and services that satisfy such needs and wants. **2. Creating a market offering:** Market offering refers to a complete offer for a product or service, having given features like size, quality, taste, etc. at a certain price; available at a given outlet or location and so on. A good product is developed after analysing needs and wants of the potential buyers. **3. Customer value:** The buyers will purchase a product only if it is perceived to be giving greatest benefit or value for the money. The purpose of marketing is to generate customer value at a profit. **4. Exchange mechanism:** The process of marketing involves exchange of goods and services for money or for something of value to them. ***Exchange is referred to as the essence of marketing.*** *For any exchange to take place, it is important that the following conditions are satisfied:* i. *Involvement of at least two parties viz. the buyer and the seller.* ii. *Each party should be capable of offering something of value to the other.* iii. *Each party should have the ability to communicate and deliver the product or service. No exchange can take place if the buyers and sellers are not able to communicate with each other or if they can not deliver something of value to the other.* iv. *Each party should have freedom to accept or reject the other party's offer.* *The parties should be willing to enter into transactions with each other. Thus, the acceptance or rejection of the offer takes place on voluntary basis rather than on the bases of any compulsion.* **FUNCTIONS OF MARKETING SG MPC** **1. Gathering and analysing market information:** This is necessary to identify the needs of the customers and take various decisions for the successful marketing of goods and services. This is important in deciding what opportunities can best be pursued by it. **2. Marketing planning:** Marketing planning includes the plan for increasing the level of production, promotion of products, etc. Marketing planning is necessary to achieve the marketing objectives of the organisation. **3. Product designing and development:** It helps to make the product attractive to the target customers. A good design can improve performance of a product and also give it a competitive advantage in the market. **4. Standardisation and Grading:** Standardisation refers to producing goods of predetermined specifications which help in achieving uniformity and consistency in the output. *(Standardisation ensures the buyers that goods* *conform to the predetermined standards of quality, price and packaging and reduces the need for inspection, testing and evaluation of the products.)* Grading is the process of classification of products into different groups on the basis of quality, size, etc. Grading ensures that goods belong to a particular quality and helps in realising higher prices for high quality output. **5. Customer support services** such as after-sales services, handling customer complaints, maintenance services, etc. All these services aim at providing maximum satisfaction to the customers, which in turn helps in repeat sales and developing brand loyalty. ***6. Packaging and labelling 7. Branding 8. Pricing of products 9. Promotion 10. Physical distribution 11. Transportation12. Storage or Warehousing (will be repeated in marketing mix)*** **Features/Process** \(i) Choosing a target market, say a manufacturer may choose to make readymade garments for children up to the age of 5 years; \(ii) Getting, keeping as well as growing the customers. That means, to create demand for products, customer satisfaction and attract more customers. \(iii) Creating, developing and communicating superior values for the customers. The primary job of a marketing manager is to create superior values so that the customers are attracted to the products. **MARKETING MANAGEMENT PHILOSOPHIES** **1. Production Concept:** ***Starting point:*** The marketing efforts start after the product is produced in the factory; ***Focus:*** Quantity of product; ***Means:*** Product should be widely available at an affordable price; ***Ends/Objective:*** Its objective is to earn profits through large volume of production. *(Greater emphasis was placed on improving the production and distribution efficiency.)* **2. Product Concept:** ***Starting point:*** The marketing efforts start after the product is produced in the factory; ***Focus:*** Quality of product---product should be of high quality; ***Means:*** Continuous improvement in the quality of product; ***Ends/Objective:*** Its objective is to earn profits through product quality improvements. **3. Selling Concept:** ***Starting point:*** The marketing efforts start after the product is produced in the factory; ***Focus:*** It involves pushing the sale of existing products; ***Means:*** It uses aggressive selling and promotional techniques like advertising, personal selling and sales promotion to achieve the objective; ***Ends/Objective:*** Its objective is to earn profits through increased volume of sales. *(Greater importance to attracting and persuading customers to buy the product.)* **4. Marketing Concept:** ***Starting point:*** The marketing efforts start from the identification of needs of the target market; ***Focus:*** Its focus is on satisfaction of customers' needs; ***Means:*** It uses integrated marketing (in respect of product, price, promotion and physical distribution) as a means to achieve the objective; ***Ends/Objective:*** Its objective is to earn profits by satisfying needs of the target market better than the competitors. *Customer's satisfaction become the focal point of all decision making in the organisation. The basic role of a firm* *is to 'identify a need and fill it'.* ***Pillars of the Marketing Concept:*** i. *Identification of market or customer who are chosen as the target of marketing effort.* ii. *Understanding needs and wants of customers in the target market.* iii. *Development of products or services for satisfying needs of the target market.* iv. *Satisfying needs of target market better than the competitors.* v. *Doing all this at a profit.* **5. Societal Marketing Concept:** ***Starting point:*** The marketing efforts start from the identification of needs of the target market and the society; ***Focus:*** Customer needs and society's well-being. It takes care of long term well being of the consumers as well as the society ***Means:*** It uses integrated marketing as a means to achieve the objective; ***Ends/Objective:*** Its objective is to earn profits through customer satisfaction and social welfare. *(Apart from the customer satisfaction, it pays attention to the social, ethical and ecological aspects of marketing.)* **11.2 Marketing Mix: Concept and Elements** **MARKETING MIX AND ELEMENTS** Marketing mix is the combination of variables chosen by a firm to prepare its market offering. ***Marketing Mix is described as the set of marketing tools that a firm uses to pursue its marketing objectives in a target market.*** **Elements: 4Ps** **(i) PRODUCT:** Product means goods and services or 'anything of value', which is offered to the market for exchange. *Product mix is the combination of all products offered for exchange by a company.* It relates to decisions regarding planning, designing and developing the right type of products and services for the consumers. It includes branding, labelling and packaging. **(ii) PRICE:** 'Price' means the amount of money paid by a buyer in consideration of a product or a service. Price affects the revenue and profits of the firm. Price mix is related to decisions regarding the pricing of the product. The marketers have to take several pricing decisions such as: (i) Setting the pricing objectives, (ii) Determining the pricing strategies, (iii) Determining the factors affecting price, (iv) Fixing a price for the firm's products. **(iii) PLACE/PHYSICAL DISTRIBUTION:** It is concerned with making the goods and services available at the right place, in right quantity and at the right time. There are two important decisions relating to this aspect: (i) The decision regarding physical movement of goods from producers to consumers or users. It includes four major activities, viz. managing inventory, order processing, warehousing and transportation. (ii) The decision regarding the channels or using intermediaries in the distribution process, such as retailers, wholesalers, agents, etc. **(iv) PROMOTION:** Promotion of goods and services involves informing potential customers about the firm's product and persuading them to buy it. *'Promotion mix' refers to combination of promotional tools (or elements) used* *by an organisation to achieve its marketing objectives*--- (i) Advertising, (ii) Personal selling, (iii) Sales promotion, (iv) Public relations. **BRANDING (PRODUCT MIX ELEMENT)** It is the process of giving a name or a sign or a symbol, etc. to a product ***Brand***--A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one firm and to differentiate them from those of the competitors. e.g., Mercedes, Parker, Nike, Woodland. ***Brand name--***That part of a brand which can be spoken, e.g., Asian paints, Maggie and Uncle Chips. ***Brand mark--***That part of a brand which can be recognised only but cannot be spoken, e.g., 'Devil' of Onida, etc. ***Trade mark--***A brand that is given legal protection against its use by other firms. **Advantages of Branding** ***To marketers:*** \(i) Enables making product differentiation. \(ii) Ease in introduction of new product. \(iii) Firm can charge higher price for its product. \(iv) Helps in advertising and display programmes. ***To customers:*** i. Helps in product identification. ii. Status symbol because of quality. iii. Branding ensures quality of product. **Characteristics of a good brand name** 1\. The brand name should be short, easy to pronounce, spell, recognise and remember e.g., Ponds, VIP, Rin, Vim, etc. 2\. A brand should suggest the product's benefits and qualities. It should be appropriate to the product's function. e.g., Rasika, Genteel, Promise, My Fair Lady and Boost. 3\. A brand name should be distinctive e.g., Liril, Sprit, Safari, Zodiac. 4\. The brand name should be adaptable to packaging or labelling requirements, to different advertising media and to different languages. 5\. The brand name should be sufficiently versatile to accommodate new products, which are added to the product line. e.g. Maggie, Colgate. 6\. Chosen name should have staying power i.e., it should not get out of date **PACKAGING (PRODUCT MIX)** Packaging refers to the act of designing and producing the container or wrapper of a product. **Levels of packaging** ***1. Primary Packaging:*** e.g. The ointment tube. The primary package refers to the product's immediate container. It is kept till the consumer is ready to use the product or it may be kept throughout the entire life of the product. ***2. Secondary Packaging:*** e.g. The Cardboard box. The secondary package refers to the additional layers of protection. When the consumer starts using the product, the secondary packing is disposed off. ***3. Transportation Packaging:*** e.g. The Corrugated box. The transportation package refers to the package necessary for storage, identification or transportation. **Functions of packaging** ***1. Product Identification:*** Packaging greatly helps in identification of the products. For example, Colgate in red colour, or Ponds cream jar can be easily identified by its package. ***2. Product Protection:*** Packaging protects the contents of a product from spoilage, breakage, leakage, pilferage, damage, climatic effect, etc. This kind of protection is required during storing, distribution and transportation of the product. ***3. Facilitating Use of the Product:*** The size and shape of the package should be such that it should be convenient to open, handle and use for the consumers. Cosmetics, medicines and tubes of toothpastes are good examples of this. ***4. Product Promotion:*** Packaging is also used for promotion purposes. A startling colour scheme, photograph or typeface may be used to attract attention of the people at the point of purchase. Sometimes it may work even better than advertising. In self-service stores, this role of packaging becomes all the more important. **Importance of packaging** 1\. ***Rising Standards of Health*** and Sanitation as the chances of adulteration in such goods are minimised. 2\. In ***Self Service Outlets***, packaging plays the role of a silent salesman 3\. Packaging is a means of creating ***Product Differentiation***. 4\. As a result of ***Innovational Opportunity*** (e.g., milk can now be stored for 4 to 5 days without refrigeration), the scope for the marketing of products has increased. **LABELLING (PREODUCT MIX)** It refers to designing the label to be put on the package. **Functions** 1\. It ***describes the product and specifies its contents***, i.e., ingredients, net weight when packed, etc. 2\. It helps in ***identification of the product*** or brand. 3\. It helps in ***grading of products*** into different categories, e.g., Brook Bond Red Label, Yellow Label, Green Label, etc. 4\. It helps in ***promotion of products*** by attracting attention, e.g., "Baalon Mein Dum, Life Mein Fun". 5\. It ***provides information required by law***, e.g., date of manufacture, date of expiry, etc. For example, the statutory warning on the package of Cigarette or Pan Masala, 'Smoking is Injurious to Health' or 'Chewing Tobacco is Injurious to Health'. ***Label for apple juice in tetra pack of 200 mililitres*** *Name of the product : Appice* *Name of the manufacturer : Fine Juice Ltd.* *Address of the manufacturer : 54, Chandni Chowk,* *Delhi-110006* *Net weight when packed : 200 ml* *Manufacturing date : 20th Feb.2019* *Expiry date : 20th July 2019* *Maximum retail price (MRP) :* RS *20* *Batch number : D 4567* *Directions for use : To be consumed within* *3 days of opening.* *Contents : Juice concentrate, sugar,* *preservatives.* **FACTORS DETERMINING FIXATION OF PRICE (PRICE MIX)** **GM DOC2** **1. Pricing objectives:**If the objective of a firm is ***profit maximisation*** in the short run, it will charge maximum price for its products but for long run profit maximisation, it will charge lower per unit price so that it can capture large market share. Similarly, if the objective is to ***attain product quality leadership***, the firm charges higher price for providing high quality products. While if the pricing objective is to ***obtain market share leadership***, a firm will charge the lower price so that greater number of people are attracted to purchase the products.To ***survive in a competitive market***, a firm may resort to discounting its products or run a promotion campaign to liquidate its stock. **2. Product cost:** The cost sets the minimum level or the floor price at which the product can be sold. Price should recover total costs (fixed costs as well as variable costs) plus a profit margin. **3. Competition:** When a firm does not face any competition (under monopoly situation), it can enjoy complete freedom in fixing its price. But when there is intense competition, a firm should fix lower price of its products. Competitors' prices and their anticipated reactions must be considered before fixing the price of a product. **4. Utility and demand:** The utility provided by the product and the intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay. When the demand of the product is inelastic, a firm can fix higher price. However, when the demand is elastic, lower price should be fixed. **5. Government and legal regulations:** Government fixes the price of essential commodities, e.g., medicines. The Government does not allow the firms to charge a higher price of the medicine. **6. Marketing methods used:** Price determination is also affected by the distribution system, quality of salesmen employed, quality of advertising, the type of packaging, etc. **ACTIVITIES/ COMPONENTS OF PHYSICAL DISTRIBUTION** **(PLACE MIX)** **1. Order processing:** A good physical distribution system should provide for an accurate and speedy processing of orders, in the absence of which goods would reach the customers late or in wrong quantity or specifications. **2. Transportation:** It is the means of carrying the goods and raw materials from the point of production to the point of sale. It is important because unless the goods are physically made available, the sale cannot be completed. Thus, it creates place utility. A marketer firm has to analyse its transportation needs after taking into consideration various factors such as nature of product, cost and location of target market. **3. Warehousing:** It refers to the act of storing products in order to create time utility in them. The need for warehousing arises because there is a time lag between the production of goods and their sale (or use). **4. Inventory Control:** Higher the level of inventory, higher will be the level of service to customers but the cost of carrying the inventory will also be high because lot of capital would be tied up in the stock. Thus, a balance is to be maintained in respect of the cost and customer satisfaction. ***The major factors determining inventory levels include:*** *(a) Firm's policy regarding the level of customer service to be offered.* *(b) Cost of inventory, which includes holding cost such as cost of warehousing, tied up capital, etc and the manufacturing cost.* *(c) Degree of accuracy of the sales forecasts. In case more accurate estimates are available, the need for keeping very high level of inventory can be minimised.* *(d) Responsiveness of the distribution system. In case the lead time is high, there is a need to maintain higher inventory.* **CHANNELS OF DISTRIBUTION (PLACE MIX)** Channels of Distribution are set of firms and individuals that take title, or assist in transferring title, to particular goods or services as it moves from the producers to the consumers. **1. Direct channels of distribution**---It means making goods available to consumers directly by the manufacturers, e.g., selling goods through own retail outlets (e.g. Bata), Door to door selling, mail order selling, Internet selling. **2. Indirect channels of distribution**---It means making goods available to consumers by employing one or more intermediaries. - ***One level channel*** (Manufacturer -- Retailer -- Customer): Only one intermediary i.e., retailers is used, e.g., Maruti Udyog sells its cars and vans through company approved retailers; cover a wide area of market while retaining control over the Channels. - ***Two level channels*** (Manufacturer -- Wholesaler --Retailer -- Customer): used for most consumer goods like soaps, oils, clothes, rice, sugar and pulses; cover a larger market area. - ***Three level channels*** (Manufacturer -- Agent --Wholesaler -- Retailer -- Customer): Used when the manufacturer carries a limited product line and has to cover a wide market. An agent in each major area is appointed, who in turn contact the wholesalers. **CONCEPT AND ELEMENTS OF PROMOTION MIX** ***Promotion mix refers to combination of promotional tools used by an organisation to achieve its communication objectives.*** Various tools of communication are used by the marketers to inform and persuade customers about their firm's products. These include: (**i) Advertising, (ii) Personal** **Selling, (iii) Sales Promotion, and (iv) Public Relations.** ***What combination of these elements is used by a firm will depend upon various factors such as:*** \(a) nature of market, (b) nature product, (c) the promotions budget, \(d) objectives of promotion, etc. **[ADVERTISING]** **1. Advertising:** Advertising is an impersonal form of communication, which is paid for by the marketers (sponsors) to promote some goods or service. ***Features of Advertising*** *(i) **Paid Form**:* Advertising is a paid form of communication. *(ii**) Impersonal method of promotion**:* There is no direct face-to-face contact between the prospect and the advertiser. *(iii**) Identified Sponsor**:* Advertising is undertaken by some identified individual or company, who makes the advertising efforts and also bears the cost of it. **ROLE OF ADVERTISING** 1\. It **creates demand** by making people aware of products. 2\. It **educates customers** by providing useful information about how products can be used for better satisfaction. 3\. It **enhances consumer confidence** as they feel more comfortable and assured about the quality of advertised product. 4\. It helps in **introduction of new products** by communicating the positive features of new products. 5\. It helps in **creating customer loyalty** through repeated communication. 6\. It **creates better organisational image** as through advertising, message may reach people about how the organisation stands for serving the society. **PERSONAL SELLING** Personal selling involves oral presentation of message in the form of conversation with one or more prospective customers for the purpose of making sales. ***Features of Personal Selling*** ***(i) Personal Form:*** In personal selling a direct face-to-face dialogue takes place between the seller and the buyer. ***(ii) Development of Relationship:*** Personal selling allows a salesperson to develop personal relationships with the prospective customers, which may become important in making sale. **3. Sales Promotion:** Sales promotion refers to short term incentives, which are designed to encourage the buyers to make immediate purchase of a product or service, e.g. free gift offers, free sample distribution, etc. ***Companies use sales promotion tools specifically designed to promote to:*** *1. Customers (e.g., free samples, discounts, and contests)* *2. Tradesmen or middlemen (e.g., cooperative advertising, dealer discounts and dealer incentives and contests) 3. Salespersons (e.g., bonus, salesmen contests, special offers).* **DIFFERENCE BE ADVERTISING AND PERSONAL SELLING** Distinguish between advertising and personal selling on any five basis - CBSE Class 12 Business Studies - Learn CBSE Forum **PUBLIC RELATIONS** **Public Relations:** It becomes imperative to manage public opinion and the company's relation with the public on a regular basis. The voice or opinion of the general public is equally important as they may be interested in the company and its product and have an impact on the business ability to achieve its objectives. Consumer activist groups need to be satisfied because they can impose restriction on the sales of the firm's products directly by urging customers to refrain from buying them or through the imposition of laws. **Public relations management can be performed by:** \(i) the marketing department; or (ii) a separate department to manage public relations, known as the public relations department. *Their main task is to disseminate information and build goodwill about the business.* ***Public relations involve a variety of programmes designed to promote or protect a company's image and its individual products in the eyes of the public.*** For example, sponsoring sports and cultural events, contributing money and time to certain causes like environment, wildlife, children's rights, education, etc. They are especially useful when there is negative publicity about the company or its products to ensure that negative publicity does not take place at all.